I’m often asked about inflation, and whether its here to stay, or something that will get sorted out, as things return back to normal.

 

Certainly things are more expensive. As the global economy roars back after two years of lock downs due to the COVID-19 pandemic, supply chains are getting congested, causing consumers to find many products they want to be out of stock, or with higher price tags. At least for this part of the “is inflation going to last”, the answer appears to be no.

 

So you can read below, or just look at this photo. It’s all about the shipping container!:

 

 

Lets look at a bunch of sectors where the inflation is:

 

1. Shipping Containers: this is one of the main reasons with a fairly easy explanation. There is a surge in demand for containerized goods. Think back to the dark days when we were all stuck at home in the first wave of the pandemic in 2020 (as an aside what wave are we in now, so hard to keep track!), we started buying more “things.” Instead of spending on restaurants and gym subscriptions, we started ordering online. Globally, consumer demand shifted away from services and toward manufactured products. The surge in e-commerce orders is only getting stronger, as most consumers shopping behavior has permanently changed (I’d be happy to never set foot in a Mall ever again!)
2. Commodities: The same supply-demand mismatch that has affected all kinds of manufacturing inputs and consumer products has also impacted commodities like lumber and steel (recall the huge lumber price surge in Summer). Meanwhile, inclement weather in many parts of the world has also resulted in shortages of agricultural products like wheat. As economic activity around the world picks up speed, demand for fuels like gasoline, diesel and natural gas has increased fast.
3. Low-skill jobs: Employers around the world have been struggling to find enough workers to fill available jobs, especially in lower-paying jobs that may present a higher risk of COVID-19 contagion.

Bottom line: I do believe that over time, as companies and consumers readjust, all of the above will normalize. That’s not to say that inflation won’t persist because of larger government and macro reasons (for another post!), , but for what effects our day to day expenses: none of shipping containers, commodities or employment issues are really long-term fundamental changes that won’t normalize.

 

One thing that won’t be explained by inflation however, at least in Ontario, is the potential candy-haul that kids can expect for Halloween. Apparently a candy-truck was robbed in Ontario, with over $100,000 of Hershey and Ferrero Rocher chocolate: (LINK).

 

I predict, however, that this year’s Trick or Treating will go off without a hitch, and many parents and children will have belly-aches, after missing at least one Halloween due to lock-downs.